Is Personal Loans Against Fixed Deposit a Better Option?

Keeping in view today’s economy and inflation rate, it is necessary that everyone’s priority should be securing money at first. Taking this as a concern, banks, and all other financial institutions have made available some schemes which can save your money and can give in return some pre-decided amount. So deposit your money for a fixed period of time and get it back after completion of that particular period. This is called as Fixed Deposit.

It is another term used in the time of emergency. It happens when all of a sudden you need money and for that either you break your FD or withdraws some amount of it. If you withdraw the entire amount in one go, then you will have to face some penalty charges and you will not earn any interest. But in overdraft facility, you get the chance to use up to 90 percent of the deposit amount and still you will earn interest and you don’t have to face a penalty.

If you think of investing money to get a higher return than your saving account then go for FD investments. The benefits of FD investments are if you want to withdraw money from your account then you don’t need to break the whole FD instead you can get 70 to 90 percent of your amount in one shot without breaking any agreement. When you withdraw a part of your funds from FD, you are actually borrowing money from the account and you will have to pay interest according to your bank. This interest rate depends upon banks as they decide the rates.

In case you fail to repay the borrowed fund then you will lose your fixed deposit too because you can borrow up to 90 percent. The left amount in your account would be 10 percent only. On which you can’t get 100 percent interest return. But above all, you have your own benefits of FD investments.

Pre-Determined Period and Repayment:

The maturity period of any overdraft facility is equal to the maturity period of fixed deposit through which you have taken a loan. The procedure to pay this loan is somewhat equal to other loans. The bank or Non-Banking Financial Companies you opt for while taking the overdraft facility will decide your monthly installments to repay the loan.

There are few ways with the help of which you can repay all your loan. If you get a salary hike then you can fill up all your loan till the maturity gets over or there’s another way where you can submit the funds on time and i.e. the yearly bonus you get from your company. It’s a kind of one-shot payment in which a decent part of loan can be paid.

If there are benefits of overdraft facility then there is a drawback also. Once you borrow the loan from your FD account then you cannot break the FD until its maturity gets over. But you have the facility to repay all your debts till the maturity.

So at present, the overdraft facility is more beneficial than personal loan facility. The reason behind this comparison is that the personal loan carries a much higher interest rate on the amount you borrow. And eventually, you will get free from paying the unacceptable interest rate and penalty.